Suppose a company estimated bad debt expense last year in the amount of $45,000. What was...
Suppose a company estimated bad debt expense last year in the amount of $45,000. What was the effect on the accounting equation last year?
Assets
[ Choose ] Decreased Increased No Change
Liabilities
[ Choose ] Decreased Increased No Change
Equity
[ Choose ] Decreased Increased No Change
Homework Answers
Answer
Assets - decreased
Liabilities - No change
Equity - No change
Explanation -
Effect of estimated bad debts expense =
Entry will be -
Bad debt expense. Debit
Allowance for doubtful debts. Credit
Bad expense is reported in Income statement and allowance will be shown in balance sheet under Accounts receivables. Allowance will reduce the Account s receivable balance on balance sheet.
So the effect will be -
Income will be reduced and accounts receivable will be reduced on assets side. No effect will be on liabilities and equity.
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Suppose a company estimated bad debt expense last year in the
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